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SHARE-BASED COMPENSATION | 12 Months Ended
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Dec. 31, 2016
SHARE-BASED COMPENSATION |
SHARE-BASED COMPENSATION | 15. SHARE‑BASED COMPENSATION Overview of Share‑Based Compensation Plan 2007 Equity Incentive Plan The Company has granted incentive stock options and other equity awards pursuant to the Amended and Restated Broadwind Energy, Inc. 2007 Equity Incentive Plan (the “2007 EIP”), which was approved by the Board in October 2007 and by the Company’s stockholders in June 2008. The 2007 EIP has been amended periodically since its original approval. The 2007 EIP reserved 691,051 shares of the Company’s common stock for grants to officers, directors, employees, consultants and advisors upon whose efforts the success of the Company and its affiliates depends to a large degree. As of December 31, 2016, the Company had reserved 30,233 shares for issuance upon the exercise of stock options outstanding and no shares for issuance upon the vesting of RSU awards outstanding. As of December 31, 2016, 253,659 shares of common stock reserved for stock options and RSU awards under the 2007 EIP have been issued in the form of common stock. 2012 Equity Incentive Plan The Company has granted incentive stock options and other equity awards pursuant to the Broadwind Energy, Inc. 2012 Equity Incentive Plan (the “2012 EIP”), which was approved by the Board in March 2012 and by the Company’s stockholders in May 2012. The 2012 EIP reserved 1,200,000 shares of the Company’s common stock for grants to officers, directors, employees, consultants and advisors upon whose efforts the success of the Company and its affiliates will depend to a large degree. As of December 31, 2016, the Company had reserved 37,205 shares for issuance upon the exercise of stock options outstanding and 64,759 shares for issuance upon the vesting of RSU awards outstanding. As of December 31, 2016, 583,894 shares of common stock reserved for stock options and RSU awards under the 2012 EIP have been issued in the form of common stock. 2015 Equity Incentive Plan The Company has granted equity awards pursuant to the Broadwind Energy, Inc. 2015 Equity Incentive Plan (the “2015 EIP;” together with the 2007 EIP and the 2012 EIP, the “Equity Incentive Plans”), which was approved by the Board in February 2015 and by the Company’s stockholders in April 2015. The purposes of the 2015 EIP are (i) to align the interests of the Company’s stockholders and recipients of awards under the 2015 EIP by increasing the proprietary interest of such recipients in the Company’s growth and success; (ii) to advance the interests of the Company by attracting and retaining officers, other employees, non-employee directors and independent contractors; and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders. Under the 2015 EIP, the Company may grant (i) non-qualified stock options; (ii) “incentive stock options” (within the meaning of IRC Section 422); (iii) stock appreciation rights; (iv) restricted stock and RSUs; and (v) performance awards. The 2015 EIP reserves 1,100,000 shares of the Company’s common stock for grants to officers, directors, employees, consultants and advisors upon whose efforts the success of the Company and its affiliates will depend to a large degree. As of December 31, 2016, the Company had reserved 427,417 shares for issuance upon the vesting of RSU awards outstanding. As of December 31, 2016, 47,669 shares of common stock reserved for RSU awards under the 2015 EIP had been issued in the form of common stock. Stock Options. The exercise price of stock options granted under the Equity Incentive Plans is equal to the closing price of the Company’s common stock on the date of grant. Stock options generally become exercisable on the anniversary of the grant date, with vesting terms that may range from one to five years from the date of grant. Additionally, stock options expire ten years after the date of grant. The fair value of stock options granted is expensed ratably over their vesting term. Restricted Stock Units (RSUs). The granting of RSUs is provided for under the Equity Incentive Plans. RSUs generally vest on the anniversary of the grant date, with vesting terms that may range from one to five years from the date of grant. The fair value of each RSU granted is equal to the closing price of the Company’s common stock on the date of grant and is generally expensed ratably over the vesting term of the RSU award. Stock option activity during the years ended December 31, 2016 and 2015 under the Equity Incentive Plans was as follows:
|  |  |  |  |  |  |  | Weighted Average |  | Aggregate Intrinsic |
|  |  |  |  | Weighted Average |  | Remaining |  | Value |
|  |  | Options |  | Exercise Price |  | Contractual Term |  | (in thousands) |
Outstanding as of December 31, 2015 |  |  | 144,197 |  | $ | 17.98 |  |  |  |  |  |
Granted |  |  | — |  |  | — |  |  |  |  |  |
Exercised |  |  | (5,647) |  |  | 3.39 |  |  |  |  |  |
Forfeited |  |  | — |  |  | — |  |  |  |  |  |
Expired |  |  | (71,112) |  |  | 12.52 |  |  |  |  |  |
Outstanding as of December 31, 2016 |  |  | 67,438 |  | $ | 24.96 |  | 4.38 |  | $ | 24,220 |
Exercisable as of December 31, 2016 |  |  | 67,438 |  | $ | 24.96 |  | 4.38 |  | $ | 24,220 |
The following table summarizes information with respect to all outstanding and exercisable stock options under the Equity Incentive Plans as of December 31, 2016:
|  |  |  | Options Outstanding |  |  | Options Exercisable |
|  |  |  |  |  |  |  |  | Weighted Average |  |  |  |  |  |  |
|  |  |  | Number of options |  | Weighted Average |  | Remaining |  |  | Number |  | Weighted Average |
Exercise Price or Range |  | outstanding |  | Exercise Price |  | Contractual Term |  |  | Exercisable |  | Exercise Price |
$3.39 | - | $13.50 |  | 52,115 |  | $ | 6.29 |  | 5.01 | years |  | 52,115 |  | $ | 6.29 |
$54.40 | - | $92.50 |  | 5,823 |  |  | 57.67 |  | 3.07 | years |  | 5,823 |  |  | 57.67 |
$99.90 | - | $128.50 |  | 9,500 |  |  | 107.34 |  | 1.75 | years |  | 9,500 |  |  | 107.34 |
|  |  |  | 67,438 |  | $ | 24.96 |  | 4.38 | years |  | 67,438 |  | $ | 24.96 |
The following table summarizes information with respect to outstanding RSU’s as of December 31, 2016 and 2015:
|  |  |  |  | Weighted Average |
|  |  |  |  | Grant-Date Fair Value |
|  |  | Number of Shares |  | Per Share |
Unvested as of December 31, 2015 |  |  | 377,810 |  | $ | 4.87 |
Granted |  |  | 411,910 |  | $ | 2.84 |
Vested |  |  | (198,762) |  | $ | 4.73 |
Forfeited |  |  | (98,782) |  | $ | 3.22 |
Unvested as of December 31, 2016 |  |  | 492,176 |  | $ | 3.56 |
The fair value of each stock option award is estimated on the date of grant using the Black‑Scholes option pricing model. The determination of the fair value of each stock option is affected by the Company’s stock price on the date of grant, as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the expected life of the awards and actual and projected stock option exercise behavior. There were no stock options granted during the twelve months ended December 31, 2016. During the years ended December 31, 2016 and 2015, the Company utilized a forfeiture rate of 25% for estimating the forfeitures of stock compensation granted. The following table summarizes share‑based compensation expense, net of taxes withheld, included in the Company’s consolidated statements of operations for the years ended December 31, 2016 and 2015 as follows:
|  |  | For the Years Ended |
|  |  | December 31, |
|  |  | 2016 |  | 2015 |
Share-based compensation expense: |  |  |  |  |  |  |  |
Cost of sales |  |  | $ | 90 |  | $ | 131 |
Selling, general and administrative |  |  |  | 663 |  |  | 788 |
Income tax benefit (1) |  |  |  | — |  |  | — |
Net effect of share-based compensation expense on net income (loss) |  |  | $ | 753 |  | $ | 919 |
Reduction in earnings per share: |  |  |  |  |  |  |  |
Basic earnings per share |  |  | $ | 0.05 |  | $ | 0.06 |
Diluted earnings per share |  |  | $ | 0.05 |  | $ | 0.06 |
| (1) |  | Income tax benefit is not illustrated because the Company is currently in a full tax valuation allowance position and an actual income tax benefit was not realized for the years ended December 31, 2016 and 2015. The result of the income (loss) situation creates a timing difference, resulting in a deferred tax asset, which is fully reserved for in the Company’s valuation allowance.
| (2) |  | Diluted earnings per share for the year ended December 31, 2015 does not include common stock equivalents due to their anti‑dilutive nature as a result of the Company’s net losses for the period. Accordingly, basic earnings per share and diluted earnings per share are identical for the period.
As of December 31, 2016, the Company estimates that pre‑tax compensation expense for all unvested share‑based awards, including both stock options and RSUs, in the amount of approximately $1,113 will be recognized through the year 2020. The Company expects to satisfy the exercise of stock options and future distribution of shares of restricted stock by issuing new shares of common stock.

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